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Ballmer reveals Microsoft’s premium strategy

Customers will prefer paid-for software in future

Five years from now Microsoft customers will approve of the fact that the software giant’s products are not free, because they’ll find great value in what the company offers, Steve Ballmer, chief executive at Microsoft, predicts.

Ballmer was interviewed by two Gartner analysts on stage in front of some of the 6,000 attendees at the Gartner Symposium ITExpo in Orlando.

Ballmer answered questions during a 45-minute interview where analysts and audience members asked questions about Vista, Microsoft Live, software-as-a-service and how the company expects to compete with freeware.

First of all, Ballmer said the freeware movement is not the end of software as we know it

"I'm biased on this topic, but value delivered through information technology is through software," Ballmer said. "It’s not the end of software or the end of major innovations that take more than three months to get done. We will continue to have a research group. It will take multiple years for the transition."

"It has been three or four years where our most significant competition has been free," he said. "We have learned customers care about total value, not cost of actual software, but total cost." Software is becoming "something live, not just on websites, but all software will have a click-to-run capability," he added.

Software will be just as quick as accessing a website in this click-to-run world, Ballmer said. Click-to-run, which lets users start programs regardless of whether they are installed online or locally, is reminiscent of the client-server models popular in the early 1990s, but faster according to Ballmer. He said an application such as Office could be deployed on a server, behind a firewall rather than on user desktops. And the application would load as fast as if the user clicked on a web page.

Ballmer also questions the belief of some that software will go to short cycles of innovation. That would mean the end of "very deep innovation, which I don’t believe and the end of very deep integration, which I don’t agree with, nor do the SAPs or Oracles".

Microsoft has opted not to use the term software-as-a-service, but software plus service. "That’s our way of saying service like simplicity with rich capabilities," Ballmer said. But it’s also about the value of a strong client. "It’s the power of using a client, AJAX uses the power of a client, Microsoft’s instant messenger and Google all use the power of the client."

Ballmer also fielded questions about the forthcoming and oft-delayed Vista operating system. He said that in the first two years after XP, Microsoft engineers worked on Longhorn. They reengineered Windows so that there was too much innovation to integrate, and that was "beyond the state of the art for us or anyone else in terms of engineering".

"We have to innovate and integrate, but not necessarily at the same time. There was too much chaos in the engineering process. After two years we stopped. We can use those technologies, but we have to do some different things."

Once Microsoft made that decision, the company went into a more normal development cycle with Vista expected to come out two to three years from that point.


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